Sunday, April 04, 2004

The economics of family size

This good article in Slate argues that the government should not encourage ever larger families through subsidies and tax breaks. His argument is that there is a trade off between family size and family quality, in that additional mouths to feed means less to go around.
With the addition of the third child, firstborns don't appear to suffer on the educational front. But middle-borns are severely hurt by the addition of another mouth to feed: His parents are 25 percent less likely to send him to private school, and he is several times more likely to be held back a grade. The third child is also less likely to receive parental financial investment in his or her education and can suffer from elevated risk of academic failure. Evidently, only firstborns get off scot-free.
Chicago Econ Nobel Prize winner Gary Becker has also looked extensively at family size, most of which is in the excellent Treatise on the Family. Becker had the insight to make one assumption in the Slate article explicit -- that investing in your child is worthwhile. Remember -- there was a time when new children could be set to work around the farm almost immediately -- the idea that they should be trained until they are 22 is very new. Becker coined the phrase "human capital" to capture the great productivity people could build up if they invested in education and experience, and tied that to the decision over family size. He also figured that in a society with high returns to human capital (education pays), it is best to have smaller families and invest more in each child. In a society with low returns to human capital (education does not pay), it is best to have larger families and invest less in each child. He sums this up, and more besides, here.


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